Credit Bureau Justice?

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Credit Bureau

Source: Smart Money

It’s rare that any of the three big credit bureaus are reported for the good things they may do. You know, like helping consumers right the wrongs on their reports? Maybe working with consumer watchdog groups to improve accuracy? While that may not be the priority of any credit bureau, that soon could be changing.

An Oregon woman, Julie Miller, was so frustrated with the credit bureau Equifax that she sued. The inaccuracies were referred to as “major” and included collection attempts for accounts she did not own and wrong social security numbers being included on her report. For two years, she tried daily but had no success. And then she sued. A federal jury agreed and awarded her $18.4 million in punitive damages and another $180,000 in compensatory damages. Looks like she may not be needing a credit history in the immediate future.

Look for Equifax to Appeal

It’s entirely likely that Equifax will appeal the ruling. Justin Baxter is one of the attorneys who represented Miller. His father, Michael, was co-chair in the case. He said it’s been a long road for Miller,

There was damage to her reputation, a breach of her privacy and the lost opportunity to seek credit,

he told the media after the ruling. He then went on to explain she has a disabled brother and because of the errors on her credit report, she was unable to help him begin to establish his own credit.

In late 2009, Miller said she was declined by her bank for a signature loan. When she began investigating, she learned that the reason was likely due to what was being reported on her Equifax report. She went through the process that the bureau required and began filling out several different forms with the correct information and outlined those areas where the mistakes were found. Meanwhile, she said that the other two bureaus were also reporting errors but that she was able to get those remedied quickly.

Miller testified that she asked many times for copies of her credit report where the mistakes had been fixed; no one ever sent them even though they’re required by law to do so. There are federal guidelines in place for all credit bureaus to follow, including one free credit report a year and more if there are problems on that consumer’s reports. The credit bureau “failed to respond” to many of her requests.

Meanwhile, when asked to comment on the ruling, Tim Klein, an Equifax spokesman, opted not to comment and said he had no further details regarding the court’s decision.

This is likely the largest amount awarded to a consumer in a case against any credit bureau, and certainly one of the big three bureaus.

FTC Study

Earlier this year, a new Federal Trade Commission study was released. It included reviews 2,968 consumer credit reports, 21 percent of which were found to have errors. The survey was conducted as part of compliance with new federal laws. Many of those errors were big enough that they would result in a consumer being declined credit.

The survey, which is required as part of a 2003 law, found that 5 percent of the errors represented issues that would lead consumers to be denied credit.

Another report, this time conducted by the Columbus Dispatch newspaper in Ohio took a closer look at 30,000 consumer complaints that had been filed with the FTC and attorneys general in more than 23 states. This investigation revealed complaints that took months to report, even the most basic of errors resulted in long delays.

New Methods of Gathering Data

This news may not inspire confidence in a new aspect of credit reporting the agencies are now implementing. Moving forward, American consumers who request and receive copies of their credit reports will be able to see how fast they’re able to pay off their credit balances. Remember, credit scores are based partly on the payment histories. Typically, they alert others looking at your report know if you pay your bills on time and the balance. Now, though, it will include information calculated by algorithms that will show how long it’s taking you to pay down a balance. Specifically, the methods are looking primarily at credit card balances, but will include others, such as automobile loans, in the near future.

Credit Card Consumers

For now, the new data is being collected on the 160 million consumers who have active credit card balances on their credit reports. It will provide insight into things like interest you allow to accumulate, which will tell credit card companies even more to look at when weighing their decisions between approval and decline. The credit scores might tell them if you’re a good risk, but your payment habits tell them if you’re going to be a great interest paying customer. That may not be the best risk for them. In other words, being a consumer who pays his bills on time is all fine and good, but what credit card companies really want are those consumers who rarely pay their balances in full.

The reports insist the formulas for calculating the actual credit scores are still in place, but that could change over the next several years.

The whole purpose of the FICO score is to rank people in terms of their likelihood of repaying a debt,

FICO spokesman Anthony Sprauve told the media on Monday. He says that the credit bureaus are already including a two year graph showing how much you pay each month. In fact, TransUnion has been providing this addition since January. Equifax should be in full swing this fall.

So, are you a revolver, who is defined as one who carries a balance from month to month while also paying interest or are you a transactor, who pays off your transactions each and every month before any interest charges are applied? Let us know your thoughts about these new goings-on with the credit bureaus. And by the way – would you sue a credit bureau if you tried for years to right as wrong?

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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